§ I am aware that there is a certain novelty about this procedure, because the Sinking Fund which I propose to attach to the new Bonds will form part of the bargain with the public creditor and cannot therefore be suspended under any circumstances. But even during the late war more than a million of the then existing Sinking Fund was subject to the same condition; and I think the course proposed is justifiable when the security to which the Sinking Fund is attached is of comparatively short duration, and when the amount of Sinking Fund remaining available as a war reserve is itself sufficiently large. And though it has not been customary for the State to attach specific Sinking Funds to securities for which it is itself directly liable, we have several precedents for such a course as I propose in connection with guaranteed loans, such, for instance, as the Turkish 1063 Loan of 1855, the Egyptian Loan of 1885, and the Greek Loan of 1898. The proposal which I make is in fact a limited funding operation, and I so limit it for more reasons than one. Even if I were convinced that it would be necessary to have recourse to further funding, I do not think anyone will contend that the present moment is a propitious time to choose for a large issue of Consols or that it is in itself desirable, if such a result can be avoided, to create a new denomination of stock: whilst either of those alternatives, unless accompanied by such an increase in the Fixed Debt Charge as I have suggested, would tend to defer to the future obligations for which I believe that it is our present duty to provide. In any case the proposal which I have made meets the contingency for which early provision is necessary. Next year the new Sinking Fund will be increased by the falling in of some of the terminable annuities, and a larger sum will therefore be available for use, if it is so desired, in redeeming further Unfunded Debt in the hands of the public, while before long I hope we shall have also available for the same purpose the first instalment of the Transvaal War Contribution. That contribution was promised by the most representative gathering of the British inhabitants of the Transvaal which could be summoned at the time when the promise was given. Its fulfilment has been delayed by the industrial and financial depression which has since fallen upon that country; and although with the new labour conditions that depression is now passing away, we have not thought it right to impose upon the Transvaal, by the exercise of our authority in a now moribund nominated Council, an obligation which we believe the new Representative Assembly will voluntarily assume as the fulfilment of an obligation of honour and the recognition of a high Imperial duty. I do not believe that anything in the proposals which I am making, or in the increased sacrifices to pay off debt which I am asking from the public, will do anything to weaken—on the contrary, I believe they will help to strengthen—the determination of our fellow-citizens in the Transvaal to discharge as early as may be their share in the arrangement which was come to between us. In any case, I commend these proposals with confidence to 1064 the judgment of the Committee. The two things most calculated to restore our national credit to its former high level and to ease our financial position are an increase in the Sinking Fund and a diminution in the Unfunded Debt. Both are included in the plan I have submitted. I propose to issue these new bonds at once. The Committee are aware that, owing to the excess of expenditure over revenue in the earlier portion of the year, we have of late years been obliged to avail ourselves largely of the power of borrowing temporarily on Treasury Bills conferred upon us by the various Consolidated Fund Acts. If the House approves my proposal to make the new issue at an early date, I shall have the use of the money so raised in the earlier portion of the financial year, and shall be able to restrict my temporary borrowings on Treasury Bills to a proportionate extent. I hope that in other respects also we shall make fewer demands on the money market this year. In 1904 we had to raise £6,000,000 of Local Loans stock, £5,000,000 of Irish Land stock, and £6,000,000 of Exchequer Bonds for financing capital expenditure, so that, apart from temporary borrowings on Ways and Means, we took from the market no less than £17,000,000 of new money between the months of January and December. In the present calendar year I hope that it will not be necessary to make any fresh issue of Local Loans stock or to go into the market for requirements connected with our capital expenditure. If these expectations are realised, as I believe they will be, our only application to the market from January to December of the present year will be for the issue of the £6,000,000 of Irish Land stock already made, and for such temporary borrowings on Ways and Means as may still be necessary after taking credit for the issue of the new Exchequer Bonds in anticipation of the date on which the old Bonds expire. This proposal disposes of £1,000,000 out of my surplus.